The effect of economic situation on time and risk preferences: Does financial literacy matter?

Socioeconomic status is considered to have an effect on one`s economic decision-making, inducing more myopic preferences in poor people. The relationship, however, might not be that straightforward, as economic decision-making should be also determined by financial literacy. Employing a pre-registered cross-validation procedure, we tested a structural model outlining a causal mechanism of relationships between poverty, its perception, financial literacy, and economic decision-making in terms of time-discounting and risk preferences. Even after respecifying the model in the exploratory dataset, the confirmatory analyses showed mostly weak or inconclusive relationships, suggesting that time-discounting and risk preferences are rather stable traits, almost independent of one`s long-term economic situation, its perception, and financial literacy. The results suggest that financial literacy seems not to be on a causal pathway linking economic situation and economic preferences.